Herbalife Nutrition Ltd. (NYSE:HLF) is a leading global nutrition company, engaging in the development and sale of dietary supplements, weight management, sports nutrition, and personal-care products. The company leverages a direct-selling model through a network of independent distributors, positioning itself against competitors like Nu Skin Enterprises, Inc. and USANA Health Sciences, Inc. within the health and wellness industry.
Herbalife's financial metrics reveal a strong capital efficiency with a Return on Invested Capital (ROIC) of 23.13% and a Weighted Average Cost of Capital (WACC) of 7.24%. This results in a ROIC to WACC ratio of 3.19, indicating that Herbalife is generating returns significantly above its cost of capital. This performance is a positive indicator for investors, suggesting an efficient utilization of capital.
In contrast, Nu Skin Enterprises, Inc. reports a negative ROIC of -1.69% and a WACC of 5.81%, leading to a ROIC to WACC ratio of -0.29. This negative ratio highlights Nu Skin's challenges in generating adequate returns to cover its cost of capital, potentially raising concerns for investors.
Yelp Inc., while not a direct competitor in the nutrition sector, showcases a ROIC of 14.95% and a WACC of 8.25%, resulting in a ROIC to WACC ratio of 1.81. This indicates that Yelp is generating returns above its cost of capital, albeit not as efficiently as Herbalife.
Deckers Outdoor Corporation stands out with the highest ROIC to WACC ratio among the compared entities at 3.93. Boasting a ROIC of 32.85% and a WACC of 8.35%, Deckers surpasses Herbalife in capital efficiency, marking it as the most effective in generating returns relative to its cost of capital.
